How to Make Your Dealer Network Strong & Happy

Developers and their dealers often become victims of their own success.

The Developers add new outlets to fuel growth, which can lead to too many dealers competing for the same customers. Weak dealers see their sales and profits drop, and the strong ones see growth stall.

In rocky times, this is even more prevalent. Developers believe offer sales incentives or add more dealers. These steps may boost sales in the short term, but lead to erosion of dealer profits. This leads to de-motivation of dealers and sales drop in longer term.

What is the way out? Answer is strengthen Developer-dealer relationships.

Companies can pull themselves out of downturns, strengthen their competitive advantage and position themselves for growth with three simple steps that we have identified through three years of experience and analysis:

-        Make dealers feel needed -- which may require eliminating those with the weaker results;

-        Enhance support for those remain;

- Develop products that help them maximize profits and minimize competition;

-      Take steps to integrate them into company's culture and mission.

In 1985, Steinway & Sons was in a crisis. Sales were slowing and its 150 dealers were complaining about low profit margins.

Bruce Stevens, the newly hired president and chief executive, spent six months visiting dealers and listening. The result was a new dealer relationship plan in which weaker dealers were cut off, while those who remained were offered expanded, exclusive territories and profit opportunities in exchange for their stepped-up commitment to display and promote Steinway products.

Dealers initially were reluctant to invest in upgrading showrooms and adding salespeople. But as they saw Steinway making good on its promises of expanded territories, they signed on.

Steinway, a unit of Steinway Musical Instruments Inc., Waltham, Mass., today has 63 dealerships in the U.S.. Sales and margins for both Steinway and the dealers have increased.

Same thing is applicable to dealers in Real Estate also. In bad times , instead of increasing decrease the number of dealers and increase their profitability by way of branding support, territories , schemes & may be increased brokerages.

"It takes trained people, good displays, a lot of dedication & loyalty and strong programs to present when situations are bad "And that requires profitable retailers. Take away the profit and we don't get the representation the way we need". Consolidation is not the only way to show dealers that they matter. Makes dealers feel.

Have your dealers go through well designed sales and service training, as motivated and well-trained dealers are important to help customers understand the benefits of company’s products.

Ensure Profitability

If a Developer offers dealers a broader product line, it can squeeze competitors out of those stores.

In the late 1980s, Steinway developed a vision of mid-priced and low-to-mid-priced pianos with dealer profit margins as large as those of the existing Steinway line. The goal was to offer such a full and compelling line of pianos that competitors would be pushed off the showroom floor. Steinway unveiled the Boston line in 1992, and the Essex line in 2001. By 2007, the two lines accounted for roughly 70% of pianos sold by Steinway.

The new lines positioned Steinway to become the primary, and in some cases only, piano supplier for many of its dealerships. Dealers also liked the new lines because they created a natural upgrade path for customers and drove repeat business.

Same way in Real Estate also the focus of a developer should be to offer a wider & innovative range of products to its dealers . Products should be such, that they not only force dealer to sell products of his company only by pushing back the products of competitors, but also contribute to the growth of its revenues.

Build Culture

Developers need to shower dealers with training, merchandising support, promotions and good old-fashioned relationship building.

Steinway hosts an annual dealer conference at an upscale resort where almost 400 people gather to analyze past results, discuss future and celebrate successes.

In addition, salespeople and technicians attend Steinway training programs where they learn company history, production and maintenance techniques. The company helps dealers with all kinds of promotions and events.

One big gap in Real Estate sector in India today is that there is very less or no training of Sales Staff. To top it there are no institutes offering specialized courses for this sector.

A distribution channel helps Developers expand business in new territories & with customers.

A Channel Network enables you to sell to customers in geographical areas or markets that your direct sales team can’t reach. However, to ensure that your network operates effectively on your behalf, you must incorporate  right level of control and support.

Reach

Identify the geographical areas you want to reach and then create Channel Network that is already catering to these areas. Consider promoting your products on the Internet also so that you can extend coverage to areas where there is no suitable physical distribution network available.

Cost

Although a distribution network gives you a ready-made platform for expansion, it’s important to compare the cost of dealing through indirect distribution channels with the cost of setting up your own network or direct sales operations.

Without a distribution network, you will have to commit resources in order to create customers and provide them service. Compare that with the cost you will incur in creating a distribution network, giving them commissions for providing a similar level of service and providing them with marketing and training support.

Contribution

Your strategy should also take account of the potential contribution of each Channel Partner. Concentrate on working with those partners who give you maximum customer base, without any additional Marketing, Branding, Training & Support cost.

Channel Partners also provide you with local market knowledge, enabling you to establish your business in new markets without incurring heavy market entry or survey costs.

Support

Support and control are critical factors in your distribution strategy. Appointing a manager to work with Channel Partners enables you to monitor their performance and identify their support needs.

Develop marketing support programs to meet the needs of different Partners. Options include advertising, in-shop & outside branding or other promotional supports like SMS/Mailer campaigns, distribution of pamphlets, Hoardings etc.. If channel sales represent a significant proportion of your business, develop advertising and marketing campaigns to drive business to your channel partners. Conducting a training program will improve distributors’ product and marketing knowledge and enable them to deliver better results and higher standard of service to customers.

Customer Service

It’s important to identify the types of customers you wish to serve directly. Typically, these would be your largest customers or customers that demand levels of technical support beyond which is your partners’ capability. Motivate your Channel Partners to work efficiently so that you can concentrate your resources on your key accounts

A Real Estate broker is a person whom few like but have to deal with at some point. For many, a broker is a necessary evil if the aim is to buy, sell or rent a property, simply because no one else knows about available properties and the legal requirements.

At present, anyone can become a broker in India—no license or certificate is needed, and there are no rules (only norms). Countries with advanced markets have registered brokers, and one can become a property adviser only after clearing examinations. This may happen in India, too, very soon.

With the Union cabinet approving the Real Estate (Regulation and Development) Bill, 2013, the way has been paved for a Real Estate regulator, and all property agents will have to register with it. The move is expected to bring a lot of clarity to the otherwise opaque market, where it is thought that brokers ignore the interest of buyers and favor sellers.

Now, there are a few people who believe that technology can be used to abolish the need for brokers. But there are also those who believe that brokers will not only remain but will, in fact, use technology to their benefit.

No need for a middleman

A simple online search will throw up a number of names, 99Acres.com, Makaan.com, Housing.com, Magicbricks.com & so on. These allow users to select a house either to rent or buy, without the involvement of a broker.

In fact, some property portals, such as Makaan.com and Commonfloor.com, give the option to filter out properties and browse only for those that are posted by owners. “Our business is a market disruption; we do not have brokers and we have seen our business grow 10 times in the past three months,” said Amit Kumar, co-founder, Nobroker.in. The company currently offers services in Pune, Mumbai, Bangalore and Chennai.

Not just property portals, other segments of the market are also going the no-broker way. Some of the recent online Real Estate sales, such as the “Indian Realty Flash Sale” (organized by 99acres.com and Amura Marketing Technologies Ltd) and “Great Online Home Festival” (jointly organized by Magicbricks.com, Group M Worldwide Inc. and Google India Pvt. Ltd) do not involve brokers.

Here, developers put up properties online and customers can directly interact with Real Estate Developers through their marketing teams. Vikram Kotnis, managing director, Amura Marketing, while talking about the relative success of the flash sale had told Mint that one of the reasons behind the positive response was that customers felt in control as there were no brokers involved .

The main reason why most people distrust property agents is because of their unprofessional behavior. Often, local brokers work through a network and without having any direct contact with the house owner. This leads to incomplete knowledge about properties. Also, as they tend to deal with multiple properties at the same time, they do not know about smaller details of a house such as the condition of plumbing and wiring.

Intense competition within the area and a tendency to close deals at whatever cost leads to property agents hoodwinking ignorant buyers or those looking to rent a house. Often, since buyers have little or no knowledge of a property such as location, any particular problem in house/office, brokers are able to sell/rent these to unsuspecting customers.

Take the case of Bengaluru-based Arun Premlal. When he moved to the city in 2003, he went through a broker to rent a house. “That time, I was new to the place, and I didn’t have a choice, even though it was expensive,” said Premlal, manager, sales operation team, Genpact. Now, he is all set to move to another house in the city which he has bought, but he contacted the developer directly this time. “Buying a house through a broker would have been quite expensive as I would have had to pay 2% as commission,” he added.

Forming a bridge

Many, however, believe that the broker community is an integral part of the system. “They may be unorganized, but are definitely an essential link between buyers and sellers,” said Nirav Gosalia, co-founder, Realty Redefined, a firm that provides technological solutions to Real Estate brokers.

According to Gosalia, since anybody can become a broker, and the competition is high. So technology will help those who want to differentiate themselves from the crowd and provide enhanced customer service. So, the old-school broker may get wiped out but the tech savvy ones will survive.

Apart from technology, what local brokers lack is training to provide professional service. Various agencies are making an effort to fill this void.For instance, Tata Housing Development Co. Ltd recently launched a platform called “Bandhan” that will provide training and certification to brokers. “We are looking to train around 1,000 brokers a year through workshops.

We will provide customized training,” said Devina Ghildial, deputy managing director-south Asia, Royal Institution of Chartered Surveyors, a partner in the project.

What customers need

For most people looking to buy, sell or rent a house, a broker is the bridge to getting the right house or the right seller. “Real Estate is a very local subject and consumers mostly belong to the same area,” said Pankaj Kapoor, managing director, Liases Foras, a non-brokerage Real Estate research firm.

What this essentially means is that when a person is looking for a property in a particular area, brokers are the ones with the required information—which apartment blocks do not have legal issues, where the owners want to make a quick sale, which projects are closer to the Metro station, which building has a ground floor house available, and many such factors that play a role when an individual goes to buy or rent a house.

Brokers play an even more essential role in the resale property market—they are the most effective way for owners to reach customers. “A Real Estate Developer, for example, can afford to publish advertisements. But individual home owners may not have that capacity. This is where brokers become the essential channel,” said Kapoor.

It may be argued that online channels can be used to find buyers, but it is a fact that most buyers do not have the required skills, knowledge or time to go through the entire due diligence process before buying a house.

Here is where a good brokers can be of help. Moreover, the proposed Real Estate law provides for penalizing errant brokers.High Real Estate prices, too, create a need for brokers, said Kapoor. “In an efficient market, their role is limited. Their role rises and falls in sync with the industry cycle,” he added. As Real Estate prices rise, people reach out to brokers to help them find houses within their budget.

Kapoor cites a study conducted by his firm in Bengaluru. It found that while the city is a hub of information technology (I-T) professionals, few units are bought by them. “Houses are being bought mostly by entrepreneurs or the self-employed who are either looking for an upgrade or investment. The salary levels of most I-T professionals do not allow them to buy houses,” said Kapoor.

Market inefficiencies, too, create the need to go through brokers. For instance, price inefficiencies lead people from Dubai to buy in Mumbai and people from Mumbai to buy in Pune as the other market is affordable.

“Real Estate in an immobile asset; you cannot export yourself to the location. So, you have to depend on brokers,” said Kapoor.

Love them or hate them, as of now, there is no escaping brokers. Till the time prices rationalize and/or the Real Estate market becomes transparent in its dealings, the dependence on brokers will remain. But to remain relevant, the community will have to improve customer service and efficiency.